Correlation Between Keysight Technologies and Trimble

Can any of the company-specific risk be diversified away by investing in both Keysight Technologies and Trimble at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Keysight Technologies and Trimble into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Keysight Technologies and Trimble, you can compare the effects of market volatilities on Keysight Technologies and Trimble and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Keysight Technologies with a short position of Trimble. Check out your portfolio center. Please also check ongoing floating volatility patterns of Keysight Technologies and Trimble.

Diversification Opportunities for Keysight Technologies and Trimble

0.89

Correlation Coefficient

Keysight Technologies  Trimble

Very poor diversification

The 3 months correlation between Keysight and Trimble is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Keysight Technologies and Trimble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trimble and Keysight Technologies is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Keysight Technologies are associated (or correlated) with Trimble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trimble has no effect on the direction of Keysight Technologies i.e., Keysight Technologies and Trimble go up and down completely randomly.

Pair Corralation between Keysight Technologies and Trimble

Assuming the 90 days horizon Keysight Technologies is expected to generate 1.26 times less return on investment than Trimble. But when comparing it to its historical volatility, Keysight Technologies is 1.01 times less risky than Trimble. It trades about 0.09 of its potential returns per unit of risk. Trimble is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  5,180  in Trimble on September 27, 2024 and sell it today you would earn a total of  1,642  from holding Trimble or generate 31.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Keysight Technologies  vs.  Trimble

Keysight Technologies

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Keysight Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Keysight Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Trimble

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trimble are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Trimble reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Keysight Technologies and Trimble

The main advantage of trading using opposite Keysight Technologies and Trimble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Keysight Technologies position performs unexpectedly, Trimble can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Trimble will offset losses from the drop in Trimble's long position.

The idea behind Keysight Technologies and Trimble pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.